Markets Wired

The Federal Trade Commission, with assistance from local police and the United States Postal Inspection Service, today halted the operations of a massive, Largo, Florida-based telemarketing scheme operated by Suntasia Marketing, Inc. The FTC alleges that over the last several years, Suntasia used at least fifteen different business names to defraud consumers across the United States out of tens, and perhaps hundreds, of millions of dollars. According to the FTC, when Suntasia’s telemarketers called consumers to offer supposedly “free” trial memberships in discount buyers and travel clubs, they deceived consumers into divulging their bank account information and later charged consumers without authorization for a series of negative option programs. With a negative option agreement, a company takes a consumer’s silence or failure to cancel as acceptance of the offer, and permission to bill them.

“The essence of this massive telemarketing scam was simple: trick people into giving out their checking account numbers, send them a brochure on a travel and buyers club, take money out of their bank accounts for as long as possible, and make it very difficult to cancel and get a refund,” said C. Steven Baker, Director of the FTC’s Midwest Region.

Consumers complained in near-record numbers about Suntasia’s practices. In total, the FTC collected and reviewed more than 5,000 formal consumer complaints against Suntasia that were submitted to various law enforcement agencies and the Better Business Bureau.

According to the FTC’s complaint, telemarketers typically began their sales pitch by indicating that they were calling in regard to the “banking account” of their “valued customers,” to make consumers believe that Suntasia was affiliated with their banks. The telemarketers explained that the consumers had been chosen to receive a series of “free gifts,” typically a combination of either “$100 in gas coupons,” “$400 in airlines savings vouchers,” or “two free nights of hotel accommodations.” Consumers were told that they could keep these gifts even if they ultimately canceled Suntasia’s negative option program. These gifts turned out to be laden with undisclosed conditions and restrictions that rendered them effectively worthless. Also, the FTC alleges that the defendants honored the “gift” vouchers only if consumers maintained enrollment in their programs, despite the telemarketers’ promises.

After offering the “free gifts,” Suntasia telemarketers quickly attempted to obtain consumers’ account numbers. They indicated that they needed to “verify” this information to confirm consumers’ eligibility to receive the gifts. Having already pretended to be affiliated with consumers’ banks, the telemarketers now purported to already possess consumers’ bank account numbers. They read consumers their publicly available bank routing numbers, and then asked consumers to “verify” the remainder of the account number from the bottom of a check. According to the FTC, many consumers disclosed their account numbers because they believed they were simply verifying information that the telemarketers already had. The FTC also alleges that consumers frequently thought their account number was being “verified” solely to confirm their eligibility to receive the free gifts, not to authorize any future charges to their accounts.

According to the FTC’s court documents, after consumers divulged their bank account number, the telemarketers quickly began recording a “verification,” asking consumers to repeat the account number they had just “provided.” At the end of the recording, Suntasia telemarketers quickly offered consumers two additional negative option programs, commonly referred to as “upsells.” The FTC alleges, however, that these “upsell” offers were presented in such a way that consumers did not realize they were being asked to authorize the purchase of additional products and services.

The FTC maintains that Suntasia never disclosed key information about its negative option programs. For instance, the telemarketers did not tell consumers the date that Suntasia’s charges would be debited from their accounts, or the telephone numbers consumers must call to cancel to avoid being charged. Nor did Suntasia tell consumers that they would be required to call three separate telephone numbers to cancel the initial program and the two “upsells.”

If Suntasia telemarketers did discuss the length of the free trial period, they represented that this period would begin only once consumers received program materials in the mail. The FTC alleges that Suntasia actually started consumers’ free trial periods on the date of the sales call, however, meaning that consumers often had little, if any, time to cancel Suntasia’s programs without being charged. According to the FTC’s complaint, some consumers did not receive any program mailings from Suntasia and thus had no opportunity to cancel before they were charged. In many instances, these consumers received their first notice of the trial memberships when the defendants began charging them. In other instances, consumers received the program mailings only a day or two before their accounts were to be charged. Suntasia did not provide any consumers with the free trial period that was promised in their telemarketing calls.
The package consumers received in the mail also disclosed, for the first time, the telephone number that consumers must call to cancel. Prior to receiving this package, consumers had no way to contact Suntasia to cancel or to ask questions. The FTC alleges that in some instances, Suntasia proceeded to charge the accounts of even those consumers who canceled its programs. In addition, if consumers successfully canceled one program, they were not told that they still may be charged for two other programs, or that they must call different telephone numbers to cancel each of those programs.

The FTC alleges that the defendants misrepresented their affiliation with consumers’ banks or other third parties, that they already had consumers’ account numbers, the starting point and length of the free trial period, that they would honor consumers’ cancellation requests, that consumers may easily cancel their participation in a program, and that consumers are entitled to keep and to use the promised free gifts even if they ultimately cancel the negative option program. The FTC also alleges that the defendants failed to disclose, or to disclose adequately, the following: that the consumer’s account would be charged unless the consumer takes affirmative action to avoid the charge, that consumer’s checking account information would be used to debit their bank accounts, the cost of the programs, the dates the consumers’ account would be charged, the dates that the trial period begins and ends, the specific steps consumers must take in order to cancel, including that consumers must cancel each of the programs by calling a separate telephone number, and the conditions and restrictions on the “free gift” vouchers that severely limit their value and usefulness.

The FTC also alleges that the defendants debited funds from consumers’ accounts without their express verifiable authorization and express informed consent, and that they did not clearly and conspicuously disclose that the purpose of their call was to sell goods or services and the nature of those goods or services, as required by the Telemarketing Sales Rule. The defendants also allegedly illegally purchased leads containing consumers’ unencrypted bank account numbers for use in telemarketing.

At the FTC’s request, a U.S. district court in Tampa has entered a temporary restraining order that temporarily halts the allegedly deceptive scheme, freezes the assets of all defendants, and appoints a temporary receiver over the scheme’s corporate participants. According to the FTC, the scheme is run by nine interrelated companies that employ more than 700 people. The defendants charged are: FTN Promotions, Inc., doing business as Suntasia Inc., Suntasia Marketing, Inc., and Capital Vacations; Guardian Marketing Services Corp, doing business as Guardian Escrow Service; Strategia Marketing, LLC; Co-Compliance, LLC; JPW Consultants, Inc., doing business as Freedom Gold, Variety!, Credit Life, and Freedom Ring ULD; Travel Agents Direct, LLC, doing business as Travel Agents Go Direct, Florida Direct, and Lucid Long Distance; Agent’s Travel Network, Inc., doing business as Florida Passport; Bay Pines Travel, Inc.; Suntasia Properties, Inc.; Bryon W. Wolf; Roy A. Eliasson; Alfred H. Wolf; Donald L. Booth; Jeffrey P. Wolf; and John Louis Smith II.

The FTC received invaluable assistance in this matter from the United States Postal Inspection Service and the Largo, Florida Police Department. The Better Business Bureau of West Florida, Inc., the Pinellas County Department of Justice and Consumer Services, the University of Central Florida Police Department, the Miami-Dade Police Department, and the Department of Commerce’s Office of Export Enforcement also helped with this action.

The Commission vote to authorize staff to file the complaint was 5-0. The complaint and temporary restraining order were filed under seal in the U.S. District Court for the Middle District of Florida, with the seal lifting today.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.